Ambrose Evans-Pritchard Makes an Important Economic Discovery
Sometimes a little knowledge can be dangerous. As Frederic Bastiat already pointed out a long time ago, it is the hallmark of a good economist to see what is not immediately obvious. That which is not immediately seen is often far more important than what is. One of the reasons why Keynesianism has been triumphant in the 20th century (and beyond, as it appears) is precisely that it is seemingly so easy to grasp because it focuses on superficial phenomena only. It is therefore no surprise that Keynes himself was full of praise of the amateurs and economic cranks that preceded him (such as Silvio Gesell, to name one).
Ambrose Evans-Pritchard (AEP) is a declared supporter of the monetarist school, which we have frequently described as 'Keynesianism in drag'. That is perhaps not very charitable of us, but clearly the two schools have a lot in common, from their habit of aggregation of economic data to their support of statism and their embracing of 'ethical and epistemological relativism' as Hans-Hermann Hoppe has pointed out. Hoppe also notes that while monetarism is today seen as “…defin[ing] the borderline of respectable opinion on the political Right, which only extremists cross”, it was actually considered to be part of the 'left fringe' in the 1940s.
John Law, the first in a long list of monetary cranks who believed prosperity can be conjured into being via the printing press.
(John Law de Lauriston, by François GUIZOT)
The part of monetarist theory that is important for AEP is that the monetarists support money printing to avert the alleged 'danger of deflation'. In a recent article he goes on about why the Bank of England should 'never unwind QE' (gee, surprise!), as if there were actually any danger of that ever happening. We doubt the BoE actually needs his support on the issue. The danger is actually rather that it might one day listen to even more radical money cranks like Lord Adair Turner or Martin Wolf, who think it would be a great idea to simply cancel the debt the the central bank has bought.
Anyway, AEP's article is the usual tirade in defense of the printing press, and no new angle is really presented. He is rattling off the well-worn litany of evil things money printing has allegedly 'prevented', such as e.g. high unemployment by stealing from savers and favoring debtors (AEP is 'sure' unemployment is 'lower than it would have been' otherwise, which due to the lack of a time machine can of course never be proved or disproved). He graciously neglects to mention that the bonuses of bankers were also protected quite effectively.
As such the article is not really remarkable; we have allegedly avoided a “replay of the 1930s” and should all be grateful for the courageous printing of gobs of money by the central planners. However, there is one passage that reveals why it would really be best if AEP were to eschew economic theorizing:
“Puritans and Calvinists are certain that there must be sting in the QE tail for Britain in the end. Perhaps so, perhaps the expanded money base will come back to haunt us, but such arguments mostly smack of religion, dogma, and psychological obsession. There is no such determinist force at work.
Can there really be such a thing as a free lunch in economics? We will never be able to prove it either way, but on balance it looks like the answer is yes.”
We are of course not really surprised by this. Economists who doubt the wisdom of money printing are never challenged on their actual arguments (which we doubt AEP fully understands anyway). Instead they are simply denounced as 'Puritans and Calvinists' driven be 'religious dogma', which admittedly is a lot easier to do than engaging with their arguments.
However, even the many economists who do support central planning activities by the monetary authorities (and they are actually in the majority, not least because said authorities are a major source of income for them) would probably find it difficult to argue that there exists such a thing as a 'free lunch' in economics. They may argue that the price of 'QE' is 'worth paying', but even they won't stoop to calling it a 'free lunch'.
In fact, the only reason why there is a science of economics at all is that such a 'free lunch' does not exist. Without scarcity, there would be no need to economize and consequently there would be no economic theory either, which can only speak of those means that actually are scarce. Things that literally come for free are simply outside the sphere of economics. Economic theory has nothing to say about them.
For all those who were not fully aware yet that AEP is completely out to lunch on matters economic, this should hopefully settle the issue.
You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.
Bitcoin address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke
6 Responses to “Anglo-Saxon Central Banking Socialism = ‘Free Lunch’”
Most read in the last 20 days:
- Gold Sector Update – What Stance is Appropriate?
The Technical Picture - a Comparison of Antecedents We wanted to post an update to our late December post on the gold sector for some time now (see “Gold – Ready to Spring Another Surprise?” for the details). Perhaps it was a good thing that some time has passed, as the current juncture seems particularly interesting. We received quite a few mails from friends and readers recently, expressing concern about the inability of gold stocks to lead, or even confirm strength in gold of...
- Incrementum Advisory Board Meeting, Q1 2017 and Some Additional Reflections
Looming Currency and Liquidity Problems The quarterly meeting of the Incrementum Advisory Board was held on January 11, approximately one month ago. A download link to a PDF document containing the full transcript including charts an be found at the end of this post. As always, a broad range of topics was discussed; although some time has passed since the meeting, all these issues remain relevant. Our comments below are taking developments that have taken place since then into...
- Trump and the Draining of the Swamp
Swamp Critters BALTIMORE – The Dow is back above the 20,000-point mark. Federal debt, as officially tallied, is up to nearly $20 trillion. The two go together, egging each other on. The Dow is up 20 times since 1980. So is the U.S. national debt. Debt feeds the stock market and the swamp. What’s not up so much is real output, as measured by GDP. It’s up only 6.4 times over the same period. Debt and asset prices have been rising three times as fast as GDP for 36 years! Best...
- Gold and Silver Divergence – Precious Metals Supply and Demand
Gold and Silver Divergence – Precious Metals Supply and Demand Last week, the prices of the metals went up, with the gold price rising every day and the silver price stalling out after rising 42 cents on Tuesday. The gold-silver ratio went up a bit this week, an unusual occurrence when prices are rising. Everyone knows that the price of silver is supposed to outperform — the way Pavlov’s Dogs know that food comes after the bell. Speculators usually make it...
- When Trumponomics Meets Abenomics
Thirty Year Retread What will President Trump and Japanese Prime Minister Shinzo Abe talk about when they meet later today? Will they gab about what fishing holes the big belly bass are biting at? Will they share insider secrets on what watering holes are serving up the stiffest drinks? [ed. note: when we edited this article for Acting Man, the meeting was already underway] Japan's prime minister Shinzo Abe, a dyed-in-the-wool Keynesian and militarist, meets America's...
- The Great Wailing
Regret and Suffering BALTIMORE – Victoribus spolia... So far, the most satisfying thing about the Trump win has been the howls and whines coming from the establishment. Each appointment – some good, some bad from our perspective – has brought forth such heavy lamentations. Oh no! Alaric the Visigoth is here! Hide the women and children! And don't forget the vestal virgins, if you can find any... You’d think Washington had been invaded by Goths, now...
- Receive a One Percent Gift When Buying or Selling a Home
How to Save Money When Buying or Make More When Selling a Home In your professional capacity and perhaps also in your private life, you may be closely involved with financial and commodity markets. Trading in stocks, bonds or futures is part of your daily routine. Occasionally you probably have to deal with real estate as well though – if you e.g. want to purchase an apartment or a house, or if own a home you wish to sell. The people who took this photograph probably want to...
- Unleashing Wall Street
To Unleash or Not to Unleash, That is the Question... LOVINGSTON, VIRGINIA – Corporate earnings have been going down for nearly three years. They are now about 10% below the level set in the late summer of 2014. Why should stocks be so expensive? Example of something that one should better not unleash. The probability that a win-lose proposition will develop upon meeting it seems high. It wins, because it gets to eat... Image credit: Urs Hagen Oh,...
- Silver Futures Market Assistance – Precious Metals Supply and Demand
Silver Is Pushed Up Again This week, the prices of the metals moved up on Monday. Then the gold price went sideways for the rest of the week, but the silver price jumped on Friday. Taking off for real or not? Photo credit: NASA Is this the rocket ship to $50? Will Trump’s stimulus plan push up the price of silver? Or just push silver speculators to push up the price, at their own expense, again? This will again be a brief Report this week, as we are busy...
- Boondoggles for the Swamp Critters
Monster or Mozart? BALTIMORE – Investors seem to be holding their breath, like a man hiding a cigarette from his wife. It’s just a feeling, and it’s not the first time we’ve had it... but it feels as though it wouldn’t take much to send them all running. Actually, they're not going anywhere yet... but there is a lot of overconfidence by those who were very worried when prices were a lot better - click to enlarge. Meanwhile... we’re coming to a deep...
- The Art and Pseudoscience of Monetary Policy
Definitely Maybe Everyone’s got a plan for sale these days. In fact, there are so many plans out there we cannot keep up with them all. Eat celery sticks and lose weight. Think and grow rich. Stocks for the long run. Naturally, plans like these run a dime a dozen. All social engineers who get to impose their harebrained schemes on the rest of the world through the coercive powers of the State, as well as all armchair planners regaling us with their allegedly...
- California, Nestle and Decentralization
Goodbye, Socialist Paradise Nestle USA has announced that it will move its headquarters from Glendale, California, to Rosslyn, Virginia, taking with it about 1200 jobs. The once Golden State has lost some 1690 businesses since 2008 and a net outflow of a million of mostly middle-class people from the state from 2004 to 2013 due to its onerous tax rates, the oppressive regulatory burden, and the genuine kookiness which pervades among its ruling elites.* There has been a...